End of the Line: Takata, Supplier of Millions of Explosive Airbags, Files for Bankruptcy

Matt Posky
by Matt Posky
end of the line takata supplier of millions of explosive airbags files for

The impending bankruptcy of Japanese airbag maker Takata Corp. has been teased at and speculated upon for months. It was never a question of whether the parts supplier would go belly-up after causing the largest automotive recall in history, but how and when.

After furnishing dozens of automakers with airbag inflators what were, in essence, improvised grenades, the multi-million unit recall has left Takata with little recourse. The company has filed for bankruptcy protection in both Japan and the United States, announcing it will sell off the majority of its remaining assets to Key Safety Systems. One of the missing assets will be the equipment relating to the company’s nefarious ammonium nitrate airbag inflators.

The devices, subject to exploding with far too much force and spraying vehicle interiors with metal shrapnel, are responsible for a minimum of 16 deaths, hundreds of injuries, and the ruination of the company.

Responsible not only for providing a dangerous product but also for doing so while withholding information about defects and manipulating inflator test data, Takata’s goose has been cooked ever since it pleaded guilty to fraud earlier this year. The supplier agreed to a billion-dollar criminal fine as several of its top executives, now unemployed, were indicted by a federal grand jury for criminal wrongdoing.

Takata executives, including CEO Shigehisa Takada, have been extremely apologetic since being caught in the scandal and, according to reports from Automotive News, the Tokyo news conference to announce the bankruptcy was no different. “We spent much time on negotiations, it was extremely difficult to reach an agreement with more than 10 carmakers worldwide and a sponsor candidate company,” Takada explained.

“If things are left as is, we are aware of risks that we may not able to raise fund and to continue stable supply of products,” he continued.”In light of the management environment we face, the state of negotiations with the sponsor candidate and carmakers, and the external expert committee’s opinion, we have decided today to file for bankruptcy protection.”

The company is still required to pay almost a billion dollars in restitution. Roughly $850 million is relegated to automakers who were forced into recalls due to Takata’s actions, while another $125 million is reserved for the remaining settlements for individuals injured by airbags.

However, the total global liabilities the supplier has to endure is well into the billions. Tokyo Shoko Research Ltd. claims Takata’s total liabilities for ongoing recalls, penalties, and settlements is likely somewhere in the neighborhood of 1.7 trillion yen. That’s nearly $15 billion.

Key Safety cannot cover that and neither can Takata, even if it dissolves the family-owned holding company controlling it or abandon its stake. “Effectively, it is impossible for the founding family to remain as a big shareholder,” Takada told reporters at the bankruptcy announcement. Takata attorney Nobuaki Kobayashi stated the former Takata entity may be liquidated when operations are handed over to Key and shares could be “processed.”

Affected parties want to be reimbursed, however, and the supplier’s financial woes are of little concern to them. Peter Prieto, court-appointed counsel for the consumer plaintiffs in the Takata liability litigation, released the following statement regarding the bankruptcy filing.

“We do not expect a Takata bankruptcy to have an impact on claims pending against auto manufacturer defendants for their role in the airbag scandal. Settlement agreements with Toyota, Subaru, BMW and Mazda have already received preliminary approval from the MDL Court, and will accelerate the removal of dangerous airbag inflators from 15.8 million vehicles and compensate consumers for economic losses associated with the recall. We will continue fighting for our clients and prosecuting claims against Honda, Ford, Nissan, as well as Takata, to make sure all affected consumers receive the recourse they deserve.”

Automakers also want to be reimbursed for being placed in this situation, yet find themselves unable to get the replacement units they need from Takata, let alone adequate reparations. The recall is so vast that it covers models from several automotive brands that don’t even exist anymore, including Scion, Saab, Saturn, Pontiac, and Mercury. Currently, only 38 percent of the 43 million airbag inflators under recall in the U.S. have been repaired and there are millions more left unfixed globally. Many automakers have turned away from the supplier entirely, seeking help from its competitors to help expedite replacement units.

Key plans on taking ownership at the start of next year. Operations will continue with as much of the current staff as possible while the company refocuses its efforts on non-airbag related equipment.

“The underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished,” Key Safety CEO Jason Luo said in a statement. “We look forward to finalizing definitive agreements with Takata in the coming weeks, completing the transaction and serving both our new and long-standing customers while investing in the next phase of growth for the new [Key Safety].”

Takata will persist temporarily as a semi-separate entity to continue the 100-million inflator recall through 2019.

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  • Redapple2 I m OK with State Inspections, OF 7 , 8 OR HOWEVER OLD CARS. I get a new car every 3-5 years. Well, that aint right. When I lived in NY, it would really fry my butt to be compelled to have my new car inspected. Add in 9% sales tax ( after i ve already paid ~50% on the money when I made it - so- i had to make $2 to have $1 in my pocket- So, net it back upward? > it s a 18% tax.) Add in massive property tax, state income tax. Brutal winters. I voted with my feet. Off topic a little. Sorry.
  • Adamscotthi Thanks a lot for article!
  • MaintenanceCosts This class of car competes hard with Chargers/Challengers and modded diesel pickups for the douchey-driving crown.
  • 28-Cars-Later Corey - I think I am going to issue a fatwa demanding a cool kids car meetup in July somewhere in the Ohio region.
  • Master Baiter Might as well light 50 $100 bills on fire.